New Supply Chain challenges for Pharmaceutical Industry

02.09.2013

Category: Innovation News

The global Pharmaceutical Sector is embarking on a step change transformation journey in which the supply chain will play a strategic change management role.

Healthcare reform, patent expiries and increased service requirements will require pharma-ceutical companies to adapt their business models to accommodate market changes. The coming years, reduced costs, greater agility and improved speed to market â whilst ensuring the often complex regulatory legal framework in countries are being met â will form a chal-lenging operating landscape for companies in the industry.

This white paper outlines a strategic agenda which Buck Consultants believes companies within the industry need to address. Key to the strategic agenda is the changing commercial business model pharmaceutical companies are starting to address. Relevant to the context of this white paper is the role the supply chain will play as companies move forward to ad-dress their key business challenges. This whitepaper will address the below points and the step changes companies should consider as part of their strategic agenda.

Pharmaceutical companies will have to turn more towards direct sales channels to reduce margins in their current business. Within other industries this is a trend observed already for a much longer period of time. There will also be more focus on âsellingâ directly to pharma-cies, hospitals, care institutions and patients.

The concept of online order and e-fulfillment tools will allow pharmaceutical companies to take greater advantage of direct marketing and sales tools to manage the order manage-ment and commercial process with the various sales channels. As a result, there will be a clear tendencies towards more direct distribution routes and this will enable greater differen-tiation per product/market segment.

The supply chain will need to play a more strategic role in the business model of many pharmaceutical companies. In turn, this will require a more centrally driven supply chain organisation based on a clear mandate and with centralised budget responsibilities able to make the required step changes in the supply chain and distribution model.

We believe that within the healthcare field itself pharmaceutical companies can also learn a lot from how Bio-pharma companies have organized themselves in terms of more central-ized control, more visibility and more streamlined supply chains.

As there is no âsingle size fits allâ supply chain, pharmaceutical companies should also con-sider developing more differentiated supply chains. For instance by type of product (generic, patented, bio-pharma, narcotics, etc.) and/or by channel (wholesale, direct to pharmacy, direct to patient, etc). The value drivers for each of the product â market â channel combi-nations will have significantly different levers. A much more focused alignment with the business is key for success.

For many companies the key objective will be to first develop a more cost efficient supply chain with the corresponding organisation and infrastructure focusing on network and distri-bution optimisation. For some pharmaceutical companies, parts of their business model will require a more agile and responsive distribution model. Here the key drivers will focus on distribution solutions with CMOâs and postponement models to allow for greater flexibility and scalability beyond costs alone.

Moving forward, it is essential that the supply chain is a critical part of the financially driven business model of pharmaceutical companies. A cost effective supply chain should be inte-grally linked to the order to cash cycle and will play a more important role in the pharmaceu-tical business model of the future.